It's a sign of the times. A troubled European giant off-loads a European business to a Chinese newcomer to cut debt. Veolia Environnement , proudly French to its very title, Europe's no 1 water company (water is one of our global investment themes), has persuaded Beijing Enterprises Water Group to buy its Portuguese water and wastewater business for EUR 95mn. Since it serves drinks to 270,000 thirsty Portuguese, Veolia is selling, and Beijing is buying, a business valued at EUR 350 per water drinker, hardly a premium price if my own utility bills are any guide. But for investors like us, it's the bigger picture that counts. It is part of an ambitious 2 year EUR 6bn divestment programme, larger than Veolia's market cap, some EUR 5bn, and equivalent to just under 20% of group sales, EUR 29bn in 2012. The market likes what it sees. Remarkably, Veolia (ticker VIE:FP , geddit? ) is negotiating with unions to cut 10% of water jobs in France.

But it's Veolia's EUR 370mn sale of its Moroccan water and electricity business to investment fund Actis that is really intriguing. Veolia has raised cash and also signed a 3 year support contract to share its know-how in Morocco. Such contracts bring cash flow without commitment of capital. When a capital intensive, debt-heavy utility transforms itself into a debt-free "Knowledge Economy" company, its share rating (Veolia trades on a PER of roughly 10x and a dividend yield of over 5%) should reflect this. The previous power-hungry Enarque (Polytechnic) management who saddled Veolia with this debt over the last few years should be ducked like mediaeval witches in a vat of Veolia product, pre-processing of course.

Eoin Treacy's view With some expectations that the global population is likely to increase to 9 billion in the next few decades, demand for potable water is likely to remain on a secular upward trend. However, since potable water is also one of the most politically sensitive sectors, making money from it in the emerging market has been challenging.

Veolia Environnement has been one of the more aggressive companies in expanding internationally but it remains to be seen if its attempts to transition to a knowledge based company will be successful. The share has been forming a base, mostly above €8, since mid 2011 and has held a progression of higher reaction lows since November. It rallied from the region of the 200-day MA this week and a sustained move below the 200-day MA, currently near €8.50, would be required to question medium-term potential for continued higher to lateral ranging.

The US listed Powershares Water Resources ETF broke successfully above the psychological $20 area in December and returned to find support this week in the region of the 200-day MA near $21. (Also see Comment of the Day on March 21 st).

Pentair is the fund's largest holding and was inducted into the S&P500 Dividend Aristocrats last year. The share rallied impressively this week from the region of the 200-day MA. Flowserve, Pall Corp and Clarcor share similar patterns. American Water Works remains susceptible to mean reversion.

In the UK, Severn Trent rallied particularly impressively this month to test its 2012 highs and is susceptible to some consolidation of this move. United Utilities is testing the psychological 750p area and will need to sustain a move above it to confirm a return to medium-term demand dominance.

Hong Kong listed China Everbright broke successfully above HK$4.50 in February and has been consolidating below HK$6 for the last month. A break in the progression of higher reaction lows, currently near HK$5, would be required to question medium-term upside potential. The pace of Guangdong Investment's advance has increased of late and it is becoming increasingly susceptible to mean reversion.